Obesity remains a serious health problem and it is no secret that many people want to lose weight. Behavioral economists typically argue that “nudges” help individuals with various decisionmaking flaws to live longer, healthier, and better lives. In an article in the new issue of Regulation, Michael L. Marlow discusses how nudging by government differs from nudging by markets, and explains why market nudging is the more promising avenue for helping citizens to lose weight.

Armed with a computer model in 1935, one could probably have written the exact same story on California drought as appears today in the Washington Post some 80 years ago, prompted by the very similar outlier temperatures of 1934 and 2014.

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power. David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies.

Search form

Currency Wars Also Have Unintended Consequences and Collateral Damage

The Fed’s planned purchases of $600 billion of long-term Treasury bonds were targeted for domestic problems, but are having international consequences. The expansion of the Fed’s balance sheet drives down the foreign-exchange value of the U.S. dollar, and (same thing) forces other currencies to appreciate in value.

Emerging markets with high short-term interest rates will attract “hot money” flows. These flows are not stable sources of funding, and disrupt the small capital markets in these countries. Long-term, the appreciation of their currencies harms their competitiveness in global goods’ markets.

Brazil has already imposed capital controls and other emerging markets may follow. The Chinese in particular have reacted sharply. According to a Reuters dispatch, Xia Bin, adviser to China’s central bank, said another financial crisis is “inevitable.” He added that China will act in its own interests.

In short, the Fed’s actions have undone whatever good came out of the G20 meetings. Any hope for cooperation on currency values and financial stability is out the window. There are potential spillovers in other areas of global cooperation.

Currency wars, like other wars, have unintended consequences and collateral damage. Some countries will predictably react by imposing capital controls. Moves to curb imports can follow. Monetary protectionism leads to trade protectionism.

However it might like matters to be, the Fed cannot simply act domestically. It has reached the useful limits of further easing.